Private equity and the campaign
Here's a topic you'll hear a lot about in the general election: private equity. And you can thank one of Mitt Romney's Republican opponents for that -- Newt Gingrich.
Kai Ryssdal: We saw this in Forbes today, that Newt Gingrich sits at the top of the list of most indebted American politicians. He's $4.3 million in the hole. Legacy costs, you might say.
Another part of the Gingrich legacy, though, is the attention he drew to private equity -- more specifically to Mitt Romney's tenure at Bain Capital. And in so doing, gave President Obama a model he's begun to use in the general campaign.
From Washington, Marketplace's David Gura reports.
David Gura: A super PAC that backed Newt Gingrich got things started with an ad that attacked Bain Capital, the private equity company Mitt Romney co-founded:
Winning Our Future ad: For tens of thousands of Americans, the suffering began when Mitt Romney came to town.
That ad helped Gingrich win the South Carolina primary, and it gave President Obama grist for the general election. Yesterday, the Obama campaign released this ad, about a steel plant Bain Capital took over in 1993, and tried to turn around. In 2001, that plant went bankrupt.
Obama 2012 ad: Bain Capital walked away with a lot of money that they made off of this plant. We view Mitt Romney as a job destroyer.
Ads like these haven’t done much to help private equity’s image.
Steve Judge is the president and CEO of a trade group that represents 36 private equity firms.
Steve Judge: I don’t want to sound like a Pollyanna, but I think that it actually provides us an opportunity.
To draw attention to when private equity has helped failing companies. That’s something the Romney campaign is also trying to do. President Obama may continue to attack Romney’s ties to private equity, but Steven Davidoff, a finance professor at Ohio State University, says he has to be careful.
Steven Davidoff: Well, it’s where the money is, right?
And President Obama needs to fundraise. Last night, he collected more than a million dollars at a fundraiser hosted by Tony James, an executive with another private equity firm: Blackstone.
In Washington, I’m David Gura for Marketplace.
Bain Capital declined Marketplace's request for an interview and sent this statement:
Bain Capital is focused on growing great companies and improving their operations. We are not a political organization, and take no public position on any candidate. Mitt Romney retired from Bain Capital over 13 years ago, but we understand that in a political campaign our exemplary 28-year record will be distorted and complex business situations will be portrayed in a simplistic way. We are extremely proud of our employees and management teams, who have grown revenues in over 80 percent of our 350 companies, which include over 100 start-up investments.
Bain Capital undertook an ambitious plan in 1993 to turnaround GSI, a struggling manufacturer of specialty steel products that was slated for closure if no investor could be found. We invested more than $100 million and many thousands of hours into this turnaround, upgrading its facilities in an attempt to make the company competitive. This was unfortunately at a time when the steel industry came under enormous pressure, and nearly half of all U.S. steel companies went into bankruptcy. During the same period, we helped launch and grow Steel Dynamics, an innovative business that is today the 5th largest steel company in America, a $6 billion global leader, and home to more than 6,000 workers.